Corporate governance and firm value: a comparative analysis of state and non-state owned companies in the context of Pakistan

• DOI: https://doi.org/10.1108/CG-09-2017-0208
• Date: 03 December 2018
• Published date: 03 December 2018
• Pages: 1196-1206
• Author: Kalim Ullah Bhat,Yan Chen,Khalil Jebran,Niaz Ahmed Bhutto
• Subject Matter: Strategy,Corporate governance

Corporate governance and firm value:

a comparative analysis of state and

non-state owned companies in the

context of Pakistan

Kalim Ullah Bhat, Yan Chen, Khalil Jebran and Niaz Ahmed Bhutto

Abstract

Purpose –The purpose of this paper is to examinehow corporate governance instruments impactfirm

value in the context of Pakistan. This paper considers state- and non-state-owned enterprises and

examines whether the influence of corporate governance on firm value varies across firms having

differentnature of ownership.

Design/methodology/approach –This study opts for an unbalanced sample of state- and non-state-

owned enterprises for the period 2010-2014. Panel data regression is adopted for estimationof main results.

The suitable model, i.e. fixed and random effect model, is selected usingHausman specification test.

Findings –The notable findings show that board independence has a significant and positive

relationship with firm value only for state-owned companies. Furthermore, the results show that market

capitalization and return on assets have a significant and positive association with firm value for both

state- and non-state-ownedenterprises. All other variablesare found insignificant for both state- and non-

state-ownedcompanies, but the results areconsistent with those reported in previousstudies.

Practical implication –The findings of the study suggest that fair induction of independent directors,

appropriate boardsize and cost-benefit analysis to conduct frequentmeetings can help corporations to

improvetheir performance.

Originality/value –This studyis adding to the currentliterature by providing new insights and shows that

the impact of corporategovernance on firm value varies across firms of differenttypes of ownership, i.e.

state-and non-state-owned enterprises.

Keywords Board size, Board independence, Board meetings, TobinQ

Paper type Research paper

1. Introduction

In developed countries, there is vast literature on the investigation of the relationship

between corporate governance and firm value, and researchers have made big debates in

specific areas (Coles and Hesterly, 2000;Pass, 2004). It is also noticed that researchers

have contributed to the literature in emerging countries where big discussions are made on

the role of corporate governance on firm performance for instance by Arora and Sharma

(2016). The need to discuss corporate governance arises as a result of some scams and

collapses in the corporate sector. Anomalies result from having a weak structure of

corporate governance, which gives rise to need for reforms to improve the corporate

governance system (Arora and Sharma, 2016), and it can ultimately help in reducing

inefficiencies in the corporate sector. Ineffective corporate governance systems play a vital

role in the occurrence of accounting scams; thus, corporations having weak governance

are more inclined to anomalies (Berkman etal., 2009).

Kalim Ullah Bhat is Doctoral

Student at the School of

Accounting, Dongbei

University of Finance and

Economics, Dalian, China.

Yan Chen is Professor and

Khalil Jebran is Doctoral

Student, both at the

Dongbei University of

Finance and Economics,

Dalian, China. Niaz Ahmed

Bhutto is Professor at the

Sukkur Institute of Business

Administration, Sukkur,

Pakistan.

Received 7 September 2017

Revised 28 March 2018

21 April 2018

7 May 2018

30 May 2018

Accepted 4 June 2018

PAGE 1196 jCORPORATE GOVERNANCE jVOL. 18 NO. 6 2018, pp. 1196-1206, ©Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-09-2017-0208